greedcanbgood

Uneasy Silence About Regional Banks

"Many of these banks, especially Regions, do not have a large cushion of preferred capital to convert to common."

Your analysis is incomplete unless you provide details. Otherwise, the reader is led to believe that all your regional listed are in the same boat and clearly, they are not.

The Hole in the New Property Appraisal Rules

I think you need to do some more research. First American has a very large offering of various products and services that they sell to a number of financial institutions. Appraisals are just one small part. In addition, the number of appraisers in the marketplace has shrunk so significantly that an appraisal management company can't simply drop the ones that don't give high enough values as they are sometimes very difficult to replace. That and the increased pressure on banks and mortgage companies to make "good" loans makes this a pretty small issue over-all. Look at the tightening of credit and underwriting standards, do you think that the banks are now all ready to start lending with "loosey-goosey" appraisals? Maybe an issue in the distant future, but for the forseeable future a veritable non-factor.

How to Avoid the Next Banking Crisis: An Immodest Proposal

I have to go with Hot Richard on this one. If you limit a bank’s ability to hold consumer assets then you’ll kill the ability of the consumer to decide. In addition, you will force the banks to find other streams of asset and revenue generation which will ultimately lead to another “bubble” though who knows what it may take the form of. The current crisis was a classic example of Minsky economics and you simply can’t control it via sheer regulation.

Pre-Payments Reducing Value of Mortgage-Backed Securities

You missed out on some other key points. When determining/negotiating the value of a pool of mortgages, prepayment speed estimates are built into the agreed upon price based upon some analytics surrounding the make-up of the pool. The “risk” today isn’t necessarily prepayment speeds (although artificially keeping 1st mortgage rates low is probably causing some portfolio analysts a headache) but default rates. Buyers of these pools don’t have a good handle on the propensity for future default rates.

Banks Really Don't Need Government Help Anymore?

Well....you had me right up until the last two paragraphs, "De-TARP Them but Do Not De-Regulate".

What more regulation could you possibly want? Executive pay structure? Give me a break! That is the LEAST of the concerns. More scruntity and transparency on credit default swaps is about all the additional regulation you can place on banks before you de facto nationalize them.

Executive compensation is not the problem of the financial services industry but rather an issue across all industries. The notion of "too big to fail" is silly...if they fail, let them.

Overdraft Legislation Hangs Over TCF Financial

This legislation will affect pretty much every bank that offers a checking account. The problem here is that it’s a no-win scenario for everyone, including the customer. This is part and parcel to the olden days when there was big hoopla about how banks should pay checks as they were presented for payment and there was not enough money in the account. If a bank paid the highest dollar amounts first, checks for things like mortgage payments, car payments and insurance premiums were paid but more, smaller checks were returned unpaid, ultimately resulting in more fees. If a bank paid as many checks as possible there fewer were returned but larger, more important checks (like those mentioned above) were returned. If bank paid checks by the order of their check number, both scenarios would and could occur.

While a warning at ATM machines would seem like a good idea, there are instances where communications cause the balance displayed to not always be entirely accurate. In the end, a bank may warn someone who would not actually be overdrawn or may permit a transaction that still ultimately results in an overdraft. At POS locations, a similar situation can occur but with the added embarrassment of a declined transaction, even to otherwise “good customers”.

You can’t legislate to protect against stupidity or ignorance. If someone refuses to carry any kind of overdraft protection and/or they are unable to monitor the amount of money they have in their checking account then why should they be protected from any penalties?

Bank Stock Volatility Reflects Despair vs. Optimism Regarding Our Fragile Economy

Good perspective. I would argue however that it's not, "extremes of despair and optimism" but rather pure, unbridled uncertainty. Uncertainty in the economy as a whole but more important uncertainty at the depth and breadth of the government's role in the financial services industry.

I will be curious to see sentiment after the following: Full earnings reports for the big banks for Q1, the government report (and "transparency") on the stress tests, the governments willingness to let TARP recipients return the TARP investment early and the expediency with which some financial institutions repay TARP. These items "should" lend more clarity to volitility in bank stocks.

Bank Stock Volatility Reflects Despair vs. Optimism Regarding Our Fragile Economy

Good perspective. I would argue however that it's not, "extremes of despair and optimism" but rather pure, unbridled uncertainty. Uncertainty in the economy as a whole but more important uncertainty at the depth and breadth of the government's role in the financial services industry.

I will be curious to see sentiment after the following: Full earnings reports for the big banks for Q1, the government report (and "transparency") on the stress tests, the governments willingness to let TARP recipients return the TARP investment early and the expediency with which some financial institutions repay TARP. These items "should" lend more clarity to volitility in bank stocks.

U.S. Banks Merely Papering Over Losses

"The Financial Accounting Standards Board (FASB) was strong-armed by Congress to relax mark-to-market accounting rules to allow banks to value illiquid securities based on expected cash flow models rather than recent prices. If these rules were not eased, write downs would be rising because the market prices of these loans continue to fall."

Yes...because the old paradigm that something is worth only that which someone else is willing to pay is far to simple for today's financial markets. And, by the way, delinquencies and charge-offs are still part of the valuation calculation. Therfore, the supposition in your headline is inaccurate. Losses have been, are and will continue to be painfully reported to analysts and The Street.

Micro-Banking Has a Go in the U.S.

Desicon - P2P lending may be here to stay but I strenuously disagree that, "large number of lenders will make a much better risk assessment and price loans accordingly." If by lenders, you're talking about the general population then I'm afraid they will be better off to day trade in penny stocks.

Loans will go bad when there's a downturn in the economy - it's a given. The real problem wtih defaults in the mortgage market today is due in large part to the kind of product sold at least as much as the underwriting. In addition, decisions were made under the erroneous belief that increasing real estate vlaues were infinitely sustainable.

It'll still remain a niche - nothimg more. Economies of scale ensure that larger lenders, though they may come and go, will be able to balance the risk/rate equation most competatively.

Micro-Banking Has a Go in the U.S.

Again…a poorly researched article. The larger banks ARE indeed lending and they’re doing so to small businesses. Wells and USB especially have actually INCREASED quarter over quarter lending. Besides, what would you expect? The banks were all but filleted for non-prudent lending by the media and by congress so they tightened criteria as a response – who wouldn’t?

Micro lending is a niche at best and it is fraught with legal and regulatory issues (at least in the US) that are NOT small hurdles to jump. In addition, with only a handful of exceptions micro lending experiences generally higher default and loss rates – don’t let the success stories fool you. Factor in all this as well as administrative costs and it is neither as lucrative nor as profitable as some would have you believe.

First Quarter Dividend Statistics - What to Make of Them?

I hear you David and I do not necessarily disagree. I’m not sure I’d buy a bank today unless I felt VERY comfortable that it will be here 2 years from now. On the other hand, if I were a dividend investor I think that it is way too early to dump a bank stock simply because the dividends have been slashed – especially if I’m in it for the long haul. Besides, if I was prudent in the first place, I shouldn’t have a tone of banks in my portfolio to begin with.

Implicit in the dividend cuts (at least from the likes of Wells and USB) is the desire to get out from under the TARP debacle. US Bank especially has a Tier 1 capital ratio that is still best in class. I would be willing to bet that many of these banks will be able to raise additional capital that may dilute dividends in the short term but will result in ultimately healthy organizations that will, over time, begin increasing them.

The earlier posted relies on that dividend income to live on and in his case, you’re spot on. You said it yourself, “Nobody knows whether the general rule that "banks pay good dividends" is still true.” Much of the market today is being governed by uncertainty and until time lends clarity it’s too soon to start supposing whether or not that’s the case. =)

First Quarter Dividend Statistics - What to Make of Them?

Good article but I noticed a contradiction. On the one hand the author states (pertaining to financial stocks), “But no Sensible Dividend Investor should own those stocks.” And then goes on to say, “But dividend investing is a very long-term strategy whose success is measured over years and decades, not months or quarters.”

Look, if you need the income TODAY then the author might have a point, but if you are truly in it for the long-haul then it’s clear that financials will restore dividends to previous levels. If you think you’ll just buy then when this occurs, think again because prices will be MUCH higher than they are today. As long as you believe in the financial stocks you have and that the company will be around in the long-run you loose if you sell them now and then try to get back in later.

Changing Accounting Rules: Remember the Aftermath of the French Revolution

Ugh! Poorly researched. The change simply allows for other, empirical methods to evaluate the value of certain portfolios. NOT eliminated were default and delinquency rates – these are still part of the valuation process. The old paradigm that says the value of a given item is only that which someone else is willing to pay is far too oversimplified in today’s financial markets. This won’t change any “stress test” results and it doesn’t make valuating assets any more (or less) difficult than it was before.

Easing of Mark-to-Market Rules: Good for Banks, Bad for Investors

The only "easing" is the ability to use other empirical factors to determine value if buyers and sellers currently aren't participating in transactions of that particular type. It does NOT allow the exclusion of delinquency or defaults as a factor.

The old adage that something is worth only what someone else is willing to pay for it is far too simple for the financial markets and the easing only recognizes this.